More and more Americans are getting calls from debt collectors — for unpaid medical bills, mortgages, car loans, credit card bills, etc. In fact, one out of seven American families has a debt in collection. The Federal Trade Commission (FTC) says that it received more consumer complaints about the debt-collection industry last year than about any other industry. What you need to know now…

ASK FOR VERIFICATION

When you first get a phone call from a debt collector, don’t give any information about yourself or your financial situation. Instead, politely ask for written verification of the debt, which the collector must send within five days. Written verification includes the name of the creditor, the balance due, original due date, your account number and what action you should take if you believe that you don’t owe the money.

It’s critical not to acknowledge the debt in that initial call. If you acknowledge a debt on which the statute of limitations has run out, the clock may start all over again. The statute of limitations is the period of time a debt collector has to sue you to collect a debt. It varies by state and type of debt, generally running between three and 15 years. Check with your state attorney general’s office to see which period applies to your situation. (To find your state attorney general, go to the Web site for the National Association of Attorneys General, www.naag.org.)

After you get the written verification, you have 30 days to dispute the debt. If you don’t believe that you owe the debt or you are sure that the statute of limitations has run out, send the collection company a letter explaining concisely why you don’t owe the debt and requesting that the collector stop calling or writing to you. By law, a debt collector must stop contacting you when he/she receives your letter, although he is allowed to contact you one time to notify you of his intent or to say that there will be no further contact. This doesn’t mean that the collector must stop pursuing payment. If he/she thinks you owe the debt, he must notify you of any legal action that he intends to take.

Warning: In certain cases, collectors can sue to collect a debt that’s outside the statute of limitations, and you must respond to a legal notice or risk a judgment by default.

NEGOTIATE

If you do owe the debt but can’t pay it in full, call the debt-collection agency and say that you can’t afford to pay in full but would like to resolve the debt within your means. Decide what you can afford, then offer an amount 20% to 25% lower than that as a starting point. Example: If you owe $1,200 and feel that you can pay $400, you might say, “I can pay $300 in a lump sum to settle the debt.” Debt collectors prefer single payments to installments. Politely hold your ground if the collector tries to insist on an amount that you can’t afford. If he keeps insisting, tell him that you will contact him when you have more money.

If you’re being contacted by several debt collectors, prioritize your debts by working to pay off secured loans first. These are debts, such as mortgages and car loans, that are “secured” by collateral — namely, your house or car — which the lender could repossess.

Once you have agreed on payment, ask the debt collector to agree to remove the collection from your credit report after you have paid the debt. Collectors are not obligated to comply, but they may honor your request as a courtesy if the debt is settled to their satisfaction. Do not pay anything until you receive written confirmation of the amount and the terms to which you and the collector have agreed.

Never send a debt collector a personal check or provide a credit card number. Use a bank-certified check or Western Union money transfer, which allows you to prove payment without revealing any personal financial information.

Keep copies and written records of all communications, and send any letters certified mail, return receipt requested. Such records can help you negotiate and will be useful if you wind up in court. You can download a free worksheet from www.credit.com/stopdebtcollectors to help you keep track of your interactions.

COLLECTION NO-NOs

Be aware that under the Fair Debt Collection Practices Act, collection agencies…

Cannot threaten violence or use violence.

Cannot use obscene, profane or abusive language, including racial slurs.

Cannot call repeatedly with the intent of harassing you. (There is no set number of allowed calls — it has been left up to the courts to decide this in specific cases.) Debt collectors also may not call at “unreasonable” times, which usually means before 8 am and after 9 pm.

Cannot send a letter that appears to come from a lawyer when it does not, or otherwise falsely claim to be initiating legal action.

Cannot send a letter that shows on the envelope that it’s from a debt collector.

Cannot threaten to ruin your credit forever.

Cannot tell your employer about your debt or threaten to do so.

Cannot imply any affiliation with the government or with a law-enforcement agency.

If you believe that a debt collector is in violation of the law, file a complaint with the FTC (877-FTC-HELP, www.ftc.gov) or with your state attorney general’s office. Numerous consumer complaints about the same debt-collection company may prompt an investigation. You also may wish to retain a consumer-law attorney to see if suing the debt collector for actual and/or punitive damages is an option. This may make sense if the collector has broken the law or is suing you. A lawyer may be willing to take your case on a contingency basis (no fee unless you win). The first consultation usually is free, but be sure to ask in advance.

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